Bill would help struggling homeowners stay in their homes

February 17, 2011

During the past two weeks, the Senate began the confirmation process for Gov. Neil Abercrombie’s nominees for various cabinet and judicial positions.

Confirming pivotal positions — My Commerce and Consumer Protection Committee (CPN) recommended confirmation of Keali‘i Lopez as director of the Department of Commerce and Consumer Affairs. Testimony supporting Ms. Lopez, former CEO of Olelo, the country’s largest community media center, was overwhelmingly positive, noting personal attributes of integrity, leadership and successful stewardship of Olelo’s resources. The committee concluded that Keali‘i is imminently qualified to serve.

Shortly, we’ll take up the nomination of former Kauai Rep. Mina Morita as the first woman chair of the Public Utilities Commission. This will be the first time in many years that a PUC Commissioner has called a neighbor island “home.”

Restructuring the PUC — Recently, my committee advanced Senate Bill 99 to restructure the Public Utilities Commission and add more commissioners. This move will help ensure the PUC won’t remain Oahu-centric in dealing with neighbor island issues such as inter-island barge service and energy matters that significantly affect Maui County businesses and the community.

Current hearings on hot button issues — Legislative committees are conducting hearings on a variety of topics and constituent concerns, ranging from the decriminalization of marijuana, health insurance and identity theft to rules implementing the voters’ directive for an appointed Board of Education. Also being discussed are measures to support small businesses, create jobs and help struggling homeowners stay in their homes. Any bill referred to more than one committee must receive favorable action by Feb. 18 to advance to the next committee.

Help for struggling homeowners — My committee heard several bills relating to the foreclosure process and passed out two important measures that I introduced. The first is SB 652, which implements the recommendations of the Mortgage Foreclosure Task Force to improve transparency and help borrowers. A key feature gives a residential owner-occupant the ability to convert from a non-judicial foreclosure to a judicial foreclosure, which will allow court oversight of the process but allow lenders to seek a deficiency judgment. If the non-judicial route is followed, no deficiency judgment is allowed.

The second bill, SB 651, may have a greater impact for homeowners. It establishes a dispute resolution program that mirrors the successful Nevada program to help homeowners remain in their homes.

The highlights:

Borrowers will be advised of their right to enter into dispute resolution with their lender when a notice of default or non-judicial foreclosure is received. Borrowers will have 30 days to opt into the program.

Once in, all foreclosure actions will halt and both lenders and borrowers must comply with program rules. A lender representative must have the authority to make a decision on a loan modification or other action approved by the facilitator to resolve the dispute.

SB 651 recommends a $400 dispute resolution fee, split equally between the parties, as well as a foreclosure filing fee for non-judicial and judicial foreclosures to fund the program.

There will be a six-month moratorium of all foreclosures affecting residential owner-occupants while the program is being set up. Facilitators will need to be trained and borrower/lender forms provided.

The program will be under the auspices of the Judiciary’s Center for Alternative Dispute Resolution.

I believe this program will help residential consumers get a fair shake from their lenders and stop the run-around too many homeowners experience with Mainland institutions. Moreover, the program will utilize appropriately trained retired judges, attorneys and folks with a financial or real estate background, in addition to community mediation centers. Due to budget cuts and furlough policies, we know our judicial system is already taxed to ensure timely judgments. Through its thoughtful design, this important new program will avoid clogging our courtrooms or adding to the caseload of judges.

AOAO lien foreclosure actions not affected — Neither SB 651 nor SB 652 affects condominium or homeowner association lien foreclosures to recover delinquent fees. While those actions are also called foreclosures, they are expressly excluded in both bills.

Mahalo to Faith Action for Community Equity (FACE) and FACE-Maui for their assistance in crafting SB 651, SD1 and providing excellent testimony at our hearing. Thanks, too, to our local lending community, the Office of Consumer Protection and Center for Alternative Dispute Resolution for invaluable information on the program’s framework. I’ve asked our Ways and Means Committee to expedite this bill.

Hopefully, the House will move quickly, too, so a moratorium can be in place in March.